There are numerous studies which conclude that the poor tend to spend a far disproportionate share of their meagre incomes on festivals, weddings, funerals and other personal functions. The latest addition is an article in the Journal of Economic Perspectives, by Esther Duflo and Abhiit Banerjee of the MIT, who find that the poor spend over 10% of their income on such occassions. Naturally, it becomes an area of concern for policy makers and implementors. The challenge will be to incentivize the poor to spend less on such functions and channelise these savings to other more productive areas like food, children's education etc.
In stark contrast to this imperative, we at Vijayawada Municipal Corporation (VMC) have been for some years been doing exactly the opposite. We have been incentivizing the poor residents of slums to spend more on such functions, by covering all the 150 odd slums in the city with community function halls. On the face of it, this appears a laudable effort, with the local residents and the area councillors being its most vociferous supporters. But I will argue that, far from helping the poor this has been to their detriment.
The poor people in slums have historically had their well established way of organizing their family and community functions. These functions used to be held in small open grounds, which now house these community halls or along the more wider road margins or even the street itself. A shamiana and a makeshift stage used to be erected. Even the private individual functions of each household used to be organized as community functions with active participation of all the neighbours, apart from the relatives. The neighbours used to share resources like vessels, chairs and tables, apart from their voluntary physical labor. With limited space available, the numbers of people attending such funcitons also used to be smaller.
Into this environment was introduced the community hall. The VMC built these community halls under the British Government assisted ODA program. With the arrival of these larger community halls, the character of the private and community functions took a different turn. In contrast to the road-side, neighbour assisted community function, every event now shifted to the community hall. With all the requirements of a full fledged auditorium, the logistics increased. The number of people attending these private functions increased. Since the VMC had leased out these halls to private individuals to maintain, the rental charges became an additional burden. The community hall lease holder started supplying food and other logistics for the function, at a cost. With all these the expenditures soared.
There are some comparative figures. A traditional road-side, neighbour involved private function would cost about Rs 5000-6000, by way of function logistics. In contrast, the community hall function costs around Rs 10000-12000. The loss is not merely monetary. These functions were a useful occasion for the neighbourhood and the community to get and bond together, thereby generating valuable social capital.
Now, critics may argue that this is another of those arguments which tries to romanticise the practices of the poor. But my contention is simple - community halls have made slum functions more expensive and therefore willy-nilly makes the poor spend more on their functions and festivals. It is undoubtedly true that increasing consumerism and the spread of television channels have contributed considerably in creating this trend. But the Government have also surely contributed its share by providing greater opportunities for the poor to spend more.
Tuesday, July 31, 2007
Monday, July 30, 2007
Doping in Sport
The latest edition of the Tour de France is in news more due to a series of doping scandals, than as the great sporting spectacle that it always is. The Tour de France is not just the premier event in the cycling calendar, but is the ultimate test of human endurance (6000 calories consumed per day). It is not just a sporting event with appeal cutting across sporting boundaries, but a cultural and social event without parallel.
For the uninitiated, the Tour de France is a 3550 km long cycling race, started in 1903 and spread over three weeks and watched live by over 15 million people. The riders average a staggering 40 km per hour over the 20 gruelling stages, which include steep mountain climbs on the Alps and the Pyrenees. The winner of the Tour is resented the Yellow Jersey in front of the Arc de Triomphe along the Champs Elysee.
The 104th edition of the Tour has been dogged by controversies even before it started. With last year's winner Floyd Landis' status still up in the Malibu courts for final adjudication, the Tour started without a legally valid defending champion. A series of doping revealations early this year by previous Tour leaders, set the stage for a "Tour de Dopage". Bjarne Riis, the 1996 winner, Erik Zabel and Rolf Aldag confessed to having used blood booster EPO. Former King of the Mountains, Ivan Basso, was banned for two years following revealations of his role in a Spanish doping scandal.
After the race started with "Le Grand Depart" from London, the scandals continued to unravel. Pre-race favourite Alexandre Vinokourov and his Astana team were thrown out of the race after tests showed he had a blood transfusion prior to Stage 13, whose time trial he won. Then the race leader Michael Rasmussen was sacked by his Rabobank team for lying about his whereabouts during the build-up to the Tour, when he missed crucial drugs tests. Similarly the Cofidis team also pulled out after one of its riders, Cristian Moreni, tested postive.
Despite intense efforts, doping continues to remain one of the most important challenges in all sport. Rigorous and mandatory testing before and after individual events and random testing in team events, has had little effect in controlling the doping menace. The Tour de France, for instance, has introduced blood tests every morning and normal anti-doping tests in the afternoon on all drivers. In an attempt to monitor sportsmen on a continuous basis, out-of-competition tests have become the norm in all sports. In fact, though every imaginable regulatory solution to eliminating drug abuse in sport has been tried, doping continues to remain the major challenge facing modern day sport. However, all these attempts to address doping has been from the general framework of banning and eliminating drug use from sport. Now, the time has come to try out something different.
The incentive sytem in modern day sport is responsible for making it so vulnerable to such malaise. Sportsmen compete not for the sake of mere participation or any utopian notion of Olympian spirit, but for winning. The stakes are very high, with massive sponsorship and television and media coverage of sporting events. The returns on winning are so high that any attempt to squeeze out even the last ounce of output, including performance enhancing drugs, is worth its weight in gold. For all the rapid advances in dope detection technologies, there have been significant improvements in dope-masking technologies.
We therefore need to structure a system of incentives that while accepting the reality of doping, tries to ensure that the results truly reflect human sporting skills and abilities. This incentive structure will need to cost in the drug factor and penalize sportsmen who indulge in dope. A scientifically derived schedule of penalty factors for each category of dope offence, in every sport, can be tabulated. The penalty factor could be in terms of time and distance penalty in athletics and racing sports, goals or scores in team sports, and points in racket games. This factor should be on the higher side, so as to serve as a deterrent on drug use. For example, an Alexander Vinokurov, caught with 3 units of EPO in his blood smaple could be penalised 30 minutes, or 10 minutes per unit of EPO found. The challenge is to make the cost of using drugs prohibitively higher than its benefits. Any incentive structure will have to persuade sportsmen to give up drug use, and this is the only sustainable way to controlling drug use in sports.
Critics will say that this will rob sport of all its thrill and suspense, since the final result will be conclusive only after the dope tests. This arguement is fallacious since in any case now that is the reality with considerable number of sports events decided well after the drug tests. Administrators will simultaneously have to come up with strong enough penalties to deter sportspersons from using these performance enhancing drugs. Ultimately, modern sport is after all entertainment and theatre, packaged to make it even more alluring, and despite drugs, sporting events and performances will continue to generate spectacular thrills and suspenses.
In any case, it is hard to believe that doping and drug abuse is new to sports. The testing procedures have improved and the benefits of drug use has increased substantially over the past two decades, resulting in more sportsmen using drugs and more positive cases being detected. But sportsmen in all ages have relied on external agents, be it amphetamines or brandy or the more potent performance enhancing drugs of today, for some form of stimulation. There is an excellent article in the Guardian by Dan Geister, "Bad Drugs, great sport", on this.
For the uninitiated, the Tour de France is a 3550 km long cycling race, started in 1903 and spread over three weeks and watched live by over 15 million people. The riders average a staggering 40 km per hour over the 20 gruelling stages, which include steep mountain climbs on the Alps and the Pyrenees. The winner of the Tour is resented the Yellow Jersey in front of the Arc de Triomphe along the Champs Elysee.
The 104th edition of the Tour has been dogged by controversies even before it started. With last year's winner Floyd Landis' status still up in the Malibu courts for final adjudication, the Tour started without a legally valid defending champion. A series of doping revealations early this year by previous Tour leaders, set the stage for a "Tour de Dopage". Bjarne Riis, the 1996 winner, Erik Zabel and Rolf Aldag confessed to having used blood booster EPO. Former King of the Mountains, Ivan Basso, was banned for two years following revealations of his role in a Spanish doping scandal.
After the race started with "Le Grand Depart" from London, the scandals continued to unravel. Pre-race favourite Alexandre Vinokourov and his Astana team were thrown out of the race after tests showed he had a blood transfusion prior to Stage 13, whose time trial he won. Then the race leader Michael Rasmussen was sacked by his Rabobank team for lying about his whereabouts during the build-up to the Tour, when he missed crucial drugs tests. Similarly the Cofidis team also pulled out after one of its riders, Cristian Moreni, tested postive.
Despite intense efforts, doping continues to remain one of the most important challenges in all sport. Rigorous and mandatory testing before and after individual events and random testing in team events, has had little effect in controlling the doping menace. The Tour de France, for instance, has introduced blood tests every morning and normal anti-doping tests in the afternoon on all drivers. In an attempt to monitor sportsmen on a continuous basis, out-of-competition tests have become the norm in all sports. In fact, though every imaginable regulatory solution to eliminating drug abuse in sport has been tried, doping continues to remain the major challenge facing modern day sport. However, all these attempts to address doping has been from the general framework of banning and eliminating drug use from sport. Now, the time has come to try out something different.
The incentive sytem in modern day sport is responsible for making it so vulnerable to such malaise. Sportsmen compete not for the sake of mere participation or any utopian notion of Olympian spirit, but for winning. The stakes are very high, with massive sponsorship and television and media coverage of sporting events. The returns on winning are so high that any attempt to squeeze out even the last ounce of output, including performance enhancing drugs, is worth its weight in gold. For all the rapid advances in dope detection technologies, there have been significant improvements in dope-masking technologies.
We therefore need to structure a system of incentives that while accepting the reality of doping, tries to ensure that the results truly reflect human sporting skills and abilities. This incentive structure will need to cost in the drug factor and penalize sportsmen who indulge in dope. A scientifically derived schedule of penalty factors for each category of dope offence, in every sport, can be tabulated. The penalty factor could be in terms of time and distance penalty in athletics and racing sports, goals or scores in team sports, and points in racket games. This factor should be on the higher side, so as to serve as a deterrent on drug use. For example, an Alexander Vinokurov, caught with 3 units of EPO in his blood smaple could be penalised 30 minutes, or 10 minutes per unit of EPO found. The challenge is to make the cost of using drugs prohibitively higher than its benefits. Any incentive structure will have to persuade sportsmen to give up drug use, and this is the only sustainable way to controlling drug use in sports.
Critics will say that this will rob sport of all its thrill and suspense, since the final result will be conclusive only after the dope tests. This arguement is fallacious since in any case now that is the reality with considerable number of sports events decided well after the drug tests. Administrators will simultaneously have to come up with strong enough penalties to deter sportspersons from using these performance enhancing drugs. Ultimately, modern sport is after all entertainment and theatre, packaged to make it even more alluring, and despite drugs, sporting events and performances will continue to generate spectacular thrills and suspenses.
In any case, it is hard to believe that doping and drug abuse is new to sports. The testing procedures have improved and the benefits of drug use has increased substantially over the past two decades, resulting in more sportsmen using drugs and more positive cases being detected. But sportsmen in all ages have relied on external agents, be it amphetamines or brandy or the more potent performance enhancing drugs of today, for some form of stimulation. There is an excellent article in the Guardian by Dan Geister, "Bad Drugs, great sport", on this.
Sunday, July 29, 2007
Coping with natural disasters
Britain has been ravaged by what is being called the worst floods in the last hundred years. These floods have affected nearly a million people and has resulted in losses worth billions of dollars. The entire Government machinery has been paralysed by the enormity of the catastrophe and the unprecedented relief effort challenge.
This scale of catastrophe and Government paralysis in its wake is not new, even in the rich developed world. The aftermath of Hurricane Katrina is the most infamous example of ill managed rescue and rehabilitation efforts after a disaster. In the case of New Orleans, the problem was compounded by George W's policy of packing the Federal Emergency Management Agency (FEMA) with his cronies, who do not have any professional knowledge or experience in such activities.
For long, natural disasters have been thought to be the exclusive misfortune of the poor, developing contries of especially Asia and Africa. Floods, landslides, earthquakes, drought etc are annual events in many of these countries. In fact, many of them are intimately linked in the disaster management study circles with specific disasters, like Bangladesh with floods. But increasingly, natural disasters have stopped discriminating economic and political boundaries, and have been affecting European countries and even the United States.
These annual disasters across the developing world are occasions for the western print and electronic media to decry and drive home the utter inefficiency and ineptitude of these governments to protect their own citizens. Now with the same story being enacted in their own countries and similar (in case of New Orleans, it was worse than the worst that Bangladesh Government ever managed) ineptitude becoming evident, questions are now being raised about the inherent nature of disaster management.
Having managed three major floods in Bhadrachalam (banks of River Godavari), one very big and another smaller one in Vijayawada (banks of River Krishna), my belief is that practical, field level disaster management work, both during and in the immediate aftermath, is a highly labor intensive activity with no substitute for painstaking and concentrated human effort. Both Bhadrachalam and Vijayawada, like New Orleans, are protected to some extent by flood bunds and levees with gates, whose operation and maintenance is critical in controlling water ingress during floods. I have seen many a sleepless nights spent by officials trying to manage these gates, so as to prevent leakages during floods. In this there is no substitute for human effort and continuous vigilance.
The difficult work conditions and the constraint of resources makes rescue and rehabilitation incredibly challenging. Sophisticated machinery and logistics can be of only limited help in rescue, rehabilitation and relief (RRR). The field level experience and commitment of the RRR personnel cannot be substituted by anything. Being vulnerable and repeatedly exposed to such disasters, coastal and earth quake prone areas in developing countries have established mechanisms in place to combat these challenges whenever they strike. Such mechanisms include both the formal institutional arrangements of the Government and the societal and community networks that complement the former. These mechanisms are irreplaceable and are absent in most developed countries without frequent exposure of such disasters.
While we constantly complain about corruption and Government apathy as compounding the problems posed by natural disasters, the situation in the richer nations confirms that we do not exercise any monopoly over these attributes. Sample this from the Independent (Geoffrey Lean: Get used to floods - the worst is yet to come)
Replace Britain with India, and you have more or less the same situation here. Population pressures and scarce land availability have led to massive encroachments on river, canal, and tank bunds and even beds. The disaster management agencies are starved of resources and hence chronically ill-equipped. Flood and natural disaster insurance (cat insurance) is in its incipient stages.
This scale of catastrophe and Government paralysis in its wake is not new, even in the rich developed world. The aftermath of Hurricane Katrina is the most infamous example of ill managed rescue and rehabilitation efforts after a disaster. In the case of New Orleans, the problem was compounded by George W's policy of packing the Federal Emergency Management Agency (FEMA) with his cronies, who do not have any professional knowledge or experience in such activities.
For long, natural disasters have been thought to be the exclusive misfortune of the poor, developing contries of especially Asia and Africa. Floods, landslides, earthquakes, drought etc are annual events in many of these countries. In fact, many of them are intimately linked in the disaster management study circles with specific disasters, like Bangladesh with floods. But increasingly, natural disasters have stopped discriminating economic and political boundaries, and have been affecting European countries and even the United States.
These annual disasters across the developing world are occasions for the western print and electronic media to decry and drive home the utter inefficiency and ineptitude of these governments to protect their own citizens. Now with the same story being enacted in their own countries and similar (in case of New Orleans, it was worse than the worst that Bangladesh Government ever managed) ineptitude becoming evident, questions are now being raised about the inherent nature of disaster management.
Having managed three major floods in Bhadrachalam (banks of River Godavari), one very big and another smaller one in Vijayawada (banks of River Krishna), my belief is that practical, field level disaster management work, both during and in the immediate aftermath, is a highly labor intensive activity with no substitute for painstaking and concentrated human effort. Both Bhadrachalam and Vijayawada, like New Orleans, are protected to some extent by flood bunds and levees with gates, whose operation and maintenance is critical in controlling water ingress during floods. I have seen many a sleepless nights spent by officials trying to manage these gates, so as to prevent leakages during floods. In this there is no substitute for human effort and continuous vigilance.
The difficult work conditions and the constraint of resources makes rescue and rehabilitation incredibly challenging. Sophisticated machinery and logistics can be of only limited help in rescue, rehabilitation and relief (RRR). The field level experience and commitment of the RRR personnel cannot be substituted by anything. Being vulnerable and repeatedly exposed to such disasters, coastal and earth quake prone areas in developing countries have established mechanisms in place to combat these challenges whenever they strike. Such mechanisms include both the formal institutional arrangements of the Government and the societal and community networks that complement the former. These mechanisms are irreplaceable and are absent in most developed countries without frequent exposure of such disasters.
While we constantly complain about corruption and Government apathy as compounding the problems posed by natural disasters, the situation in the richer nations confirms that we do not exercise any monopoly over these attributes. Sample this from the Independent (Geoffrey Lean: Get used to floods - the worst is yet to come)
Half of all housing built in Britain since the Second World War - covering a total area the size of the West Midlands - has been sited on land prone to flooding. Councils and ministers have constantly disregarded warnings from the Environment Agency about unwise developments. The consequences are plain to see; most of the houses inundated in this summer's floods have been relatively new, erected in the wrong place.
Yet, even now, nearly one in every six new buildings is being placed in flood zones - and present plans suggest that this will rise to almost one in three between 2016 and 2021. The Association of British Insurers wants houses planned for much of the Thames Gateway to have their living areas on the first floor to keep them dry.
To compound the danger, successive governments have neglected Britain's flood defences. A report by the National Audit Office last month concluded that only 57 per cent of them - and just 46 per cent of those most important ones, such as those protecting towns, are in good condition.
Worse, ministers have consistently refused to give the Environment Agency the money it needs to build enough new ones, causing vital schemes to be delayed for years. Last year, they even cut the budget. In the wake of this summer's floods they have increased it by a third; but this won't take effect until 2010 and will still fall far short of what is required.
All these factors mean that the number of British homes at risk of flooding is projected to rise from two million to 3.5 million over coming decades.
Replace Britain with India, and you have more or less the same situation here. Population pressures and scarce land availability have led to massive encroachments on river, canal, and tank bunds and even beds. The disaster management agencies are starved of resources and hence chronically ill-equipped. Flood and natural disaster insurance (cat insurance) is in its incipient stages.
Friday, July 27, 2007
Auctions and Winner's Curse
Winner's Curse refers to the problem wherein the winner of auctions often overpays for his successful bid. Winner's Curse arises in auctions where there is uncertainty in the value of the item being auctioned. In its absence, the bidders are unsure about a successful bid value. If the value of the commodity is known or if there are many identical items being auctioned off, there is less likelihood of winner's curse.
There is this famous example from the Journal of Petroleum Technology (1971) explaining the Winner's Curse:
"Suppose several petroleum firms are bidding on the drilling rights to a piece of tundra. No firm is sure how much oil is underneath the property, so they hire a team of engineers to poke at the surface rocks and make a guess. The guesses will likely range from too low to too high. Some firm's engineer will probably guess right, but that firm won't win the auction. The winner will be the firm whose engineer was the most overoptimistic. The winning firm won't ultimately get as much oil as their engineers promised, meaning the firm paid too much. In short, the auction "winner" is ultimately a loser."
Auctions are an interesting case of departure from standard economic theory. Auctions with a large number of participants are more likely to cause inefficient outcomes, because the competing bidders invariably bid large and end up with a bad deal. Internet auctions, with the possibility of large number of participants, are especially vulnerable to the winner's curse problem. In fact, larger the number of participants, larger the potential for winner's curse. Alternatively, if an auction has to strike the right bid price for the winner, either there must be limited number of participants or the particular bidding process should keep off most potential bidders. But both these conditions go aginst the standard economic principles of competition.
There is also the rational bidder assumption. If any bidder turns out to be irrational, it has the potential to drive up a chain of irrationality, thereby severely distorting the price. Therefore, while theoretically auctions are the most ideal way of bringing buyers and sellers together, there are many pitfalls associated with them.
In the Vijayawada Municipal Corporation (VMC), we recently conducted a series of auctions to lease out our many vacant shopping complexes. The previous practice was to call for tenders and invite sealed bids on the goodwill amount. Since this process was not generating adequate response, it was decided to go in for auctions. These auctions were initially only single-bid, ascending (English) price auctions. But later, some of the auctions were held as single bid descending (Dutch) price auctions. There were also a few second-bid auctions, where the highest bidder gets the shop, while paying the second highest bid as goodwill amount.
It was observed that when the competition is intense, the ascending price auctions fetches better prices for the VMC. The single-bid auction appears to be the better option when the competition is neither stiff nor weak. But when the competition is limited to two or three bidders, as is the case many times, it is more beneficial for the auctioneer to hold Dutch auctions. In such Dutch auctions, the reserve price can be kept at two times the minimum goodwill amount, and the first bidder wins the bid. It is observed that in case of limited competition, ascending auction bids rarely go much beyond the reserve price. Whereas in Dutch auctions, by marking up the reserve price and thereby changing the bidding framework, we incentivize (or anchor) the bidder to quote more.
There is this famous example from the Journal of Petroleum Technology (1971) explaining the Winner's Curse:
"Suppose several petroleum firms are bidding on the drilling rights to a piece of tundra. No firm is sure how much oil is underneath the property, so they hire a team of engineers to poke at the surface rocks and make a guess. The guesses will likely range from too low to too high. Some firm's engineer will probably guess right, but that firm won't win the auction. The winner will be the firm whose engineer was the most overoptimistic. The winning firm won't ultimately get as much oil as their engineers promised, meaning the firm paid too much. In short, the auction "winner" is ultimately a loser."
Auctions are an interesting case of departure from standard economic theory. Auctions with a large number of participants are more likely to cause inefficient outcomes, because the competing bidders invariably bid large and end up with a bad deal. Internet auctions, with the possibility of large number of participants, are especially vulnerable to the winner's curse problem. In fact, larger the number of participants, larger the potential for winner's curse. Alternatively, if an auction has to strike the right bid price for the winner, either there must be limited number of participants or the particular bidding process should keep off most potential bidders. But both these conditions go aginst the standard economic principles of competition.
There is also the rational bidder assumption. If any bidder turns out to be irrational, it has the potential to drive up a chain of irrationality, thereby severely distorting the price. Therefore, while theoretically auctions are the most ideal way of bringing buyers and sellers together, there are many pitfalls associated with them.
In the Vijayawada Municipal Corporation (VMC), we recently conducted a series of auctions to lease out our many vacant shopping complexes. The previous practice was to call for tenders and invite sealed bids on the goodwill amount. Since this process was not generating adequate response, it was decided to go in for auctions. These auctions were initially only single-bid, ascending (English) price auctions. But later, some of the auctions were held as single bid descending (Dutch) price auctions. There were also a few second-bid auctions, where the highest bidder gets the shop, while paying the second highest bid as goodwill amount.
It was observed that when the competition is intense, the ascending price auctions fetches better prices for the VMC. The single-bid auction appears to be the better option when the competition is neither stiff nor weak. But when the competition is limited to two or three bidders, as is the case many times, it is more beneficial for the auctioneer to hold Dutch auctions. In such Dutch auctions, the reserve price can be kept at two times the minimum goodwill amount, and the first bidder wins the bid. It is observed that in case of limited competition, ascending auction bids rarely go much beyond the reserve price. Whereas in Dutch auctions, by marking up the reserve price and thereby changing the bidding framework, we incentivize (or anchor) the bidder to quote more.
Wednesday, July 25, 2007
Health and Education Sectors
Continuing from an earlier post (What ails our health and education system?) on the problems faced by the education and health system in developing countries, I have certain observations about the inherent nature of health and education sectors, and Government activity in general.
One, unlike other sectors, increasing investment in social welfare service sectors like education and primary health care, does not by itself necessarily translate into better quality of service delivery. Though hard infrastructure assets like building, teaching materials and medical and diagnostic equipments are important, they are not the critical factor in ensuring quality service delivery in these sectors. The crucial role is that of the teachers, doctors and nurses, or more generally the human resource. Just as the knowledge industries, health and education sectors too need to place a premium on human resources development. It is their motivation, skills and initiative that determines the quality of services delivered. While typically Government interventions in education and health care focus on the physical assets, limited attention is paid to the aforementioned more softer dimensions. But, even with more focussed attention, there are no short cuts to instilling the aforementioned skills in these functionaries.
Second, health care and education suffers from what is commonly called "Baumol's Disease". It refers to the phenomenon whereby in sectors where productivity is flat and is relatively inelastic with respect to investment, the costs and prices keep going up. This also means that even when Government spending keeps increasing, the outcomes do not improve by much. Both sectors are labor intensive, in so far as we cannot significantly reduce the staff strength, either by improving their productivity or using technology, without adversely affecting the quality of service delivery. Further, while productivity improvements are smaller, the wage increases are more regular and always higher.
This gives the impression that health and education sectors eat up more and more revenues without commensurate improvements in quality of services. The reality is that typical Government sectors like health, education, policing, regulation, general administration are low productivity growth sectors. Thus Government share of expenditure will always tend to be higher, due to the inherent nature of the actrivities it does!
One, unlike other sectors, increasing investment in social welfare service sectors like education and primary health care, does not by itself necessarily translate into better quality of service delivery. Though hard infrastructure assets like building, teaching materials and medical and diagnostic equipments are important, they are not the critical factor in ensuring quality service delivery in these sectors. The crucial role is that of the teachers, doctors and nurses, or more generally the human resource. Just as the knowledge industries, health and education sectors too need to place a premium on human resources development. It is their motivation, skills and initiative that determines the quality of services delivered. While typically Government interventions in education and health care focus on the physical assets, limited attention is paid to the aforementioned more softer dimensions. But, even with more focussed attention, there are no short cuts to instilling the aforementioned skills in these functionaries.
Second, health care and education suffers from what is commonly called "Baumol's Disease". It refers to the phenomenon whereby in sectors where productivity is flat and is relatively inelastic with respect to investment, the costs and prices keep going up. This also means that even when Government spending keeps increasing, the outcomes do not improve by much. Both sectors are labor intensive, in so far as we cannot significantly reduce the staff strength, either by improving their productivity or using technology, without adversely affecting the quality of service delivery. Further, while productivity improvements are smaller, the wage increases are more regular and always higher.
This gives the impression that health and education sectors eat up more and more revenues without commensurate improvements in quality of services. The reality is that typical Government sectors like health, education, policing, regulation, general administration are low productivity growth sectors. Thus Government share of expenditure will always tend to be higher, due to the inherent nature of the actrivities it does!
Tuesday, July 24, 2007
Transnational Risk Premiums
There are two interesting articles in The Guardian. First, by Professor Ulrich Beck of the LSE, In the new, anxious world, leaders must learn to think beyond borders, exposes us to the new world of transnational challenges.
The other article, "Blog of all blogs" by Anthony Giddens is a compilation and clarifications on all his previous blogs on Third Way, multiculturalism, inequality and social mobility, public intellectuals, New Labor, and international politics ranging from Iraq to Nicholas Sarkozy.
The other article, "Blog of all blogs" by Anthony Giddens is a compilation and clarifications on all his previous blogs on Third Way, multiculturalism, inequality and social mobility, public intellectuals, New Labor, and international politics ranging from Iraq to Nicholas Sarkozy.
Monday, July 23, 2007
What ails our health and education system?
I have read or seen any number of articles and TV discussions, wailing and complaining about how the bureaucratic and political system in India has messed up, among other things, our health care and education. It is a common refrain that though we have excellent policies and programs, our bureaucracy and politicians fail us in implementation. Interestingly, even I used to believe in the same diagnosis till I became a bureaucrat myself. With an insider's perspective, now I have a different opinion on the issue. No, there is no vested interest here, but an attempt at a honest introspection.
I will try to illustrate my case with an example. The Integrated tribal Development Agency (ITDA) of Bhadrachalam is spread out over 12175 sqkm, and has a population of over 8 lakhs. There are about 847 schools, with nearly 5000 teachers, and 70000 children in 2006-07. Among these 847 schools, 645 are elementary and often single or two teacher schools, scattered across the villages in the tribal area. The health logistics is equally massive. There are 49 Primary Health Centers, over 300 sub centers, 10 Government hospitals, and 2 Tertiary Care Hospitals. These hospitals employ over 75 doctors, 350 nurses and other paramedical staff, and 2189 Community Health Centers (CHWs). This is a more or less representative sample of education and health infrastructure in rural India.
Now, I will stick out my neck and argue that no amount of regulation and supervision alone, will abe able to control the activities of nearly 3000 health and over 5000 education staff, spread over the 12175 sq km area of Bhadrachalam. This requires calling on the inherent strength, capacity, and discipline within the entire system and its functionaries. It also requires vibrant demand side interventions and vigilance.
What are the typical problems observed in health care and education? Infrastructure and logistics are rarely the problem, though a lot more still remains to be done on that front. But the major issue is at the cutting edge, in the physical delivery of these services. To be more specific, I am referring to the quality of teaching and health care services delivered to the students and the patients by the education and health functionaries. This quality is abysmal and universally so, in all its dimensions.
For a start, a good majority of teachers and health staff do not regularly attend to their duties. Even when they do, they often shirk repsonsibility and the quality of service delivered suffers. Further, for various reasons, teachers and medical staff are poorly trained and even more poorly motivated. Many of the schools and health sub-centers are located in remote areas with poor or even non-existent roads, which are often inaccessible by any mode of public transport. There are limited or no proper accommodation facilities available, so that the teachers stay elsewhere and have to commute long distances daily. This is an immediate incentive for not attending school or hospital under some pretext or the other. Further, houses and habitations are scattered and in the absence of connectivity, it becomes difficult to traverse without personal vehicles.
On the demand side, with the domestic economic and social compulsions, children frequently drop out and back in, and it becomes a serious challenge to retain children in schools. In many villages, there is no serious demand side pressure and a lack of manifest collective will in ensuring that the school is run properly. Even if the collective will is present, the community is often powerless to have its own way. School and Hospital Committees, wherever present become ornamental and get captured by vested interests.
There are no simple solutions for these very diverse and challenging problems. No Government machinery or political and bureaucratic system can wave a magic wand to solve them. No regulatory or bureaucratic solution can get teachers to visit school everyday or pay attention to the progress of each child. Neither can it get para-medical staff to cover every child and mother with all basic RCH care, or follow-up on all malaria and TB patients without any omission.
While the regulatory and supervisory mechanism is undoubtedly important, of more relevance is the inherent capacity, responsiveness, sense of civic duty and discipline, within the system and its stakeholders. The initiative and responsiveness of the teacher or the paramedical staff is the crucial determinant in the quality of service delivered in an elementary school or health sub-center. No amount of monitoring and supervision, regulation, review meetings and reporting formats, can be a replacement for the sincerity and committment of a field functionary. We need to build capacity among field functionaries through continuous, more focused and meaningful trainings, significantly raise motivation levels, and foster competition and commitment within them. There is also the need to develop social capital and civic responsiveness among the local community and citizens.
Amidst all this gloom and adversity, and the challenges posed by scarce resources, there are glowing examples of well run schools and health centers. These schools are shining models because of the exceptional personal commitment and initiative of the respective teachers and the civic responsiveness of the local community. For these teachers, each child is not a mere statistic, but an opportunity to shape the future of a child whose fate has been placed at their hands. Similarly, there are para-medical staff who cover every ante-natal and post natal case within their jurisdiction, and who have achieved substantial success in delivering high quality RCH and general primary health services. These successes, in the sea of failures and poor quality service delivery, are testimony to the commitment and initiative of the field functionaries and the community.
Now, many people will claim that things are changing and demand side repsonsiveness, in particular, has become more robust. True, but not in the scale for it to create a substantial and widely felt impact. Typically, aid agencies and opinion makers are exposed only to the successfully run school or hospital systems, where there is harmonious convergence between the functionaries and the community. It is understandable, but misleading to draw grand conclusions from these "show piece" models.
With due respect to poverty experts, I am convinced (since I am part of the system which does this) that except for a very small minority, the majority of them are paraded or get to visit only the more sanitised and successfully run models. This is understandable since the NGOs or the Government agencies have a clear incentive in showcasing the successes, so as to impress the funding agencies or donors, and also to enhance their reputations. The impressions they carry back home and propagate are therefore skewed and deceptive.
Yes, bureaucrats and politicians have contributed more than their share in spoiling the quality of primary health care and education services delivered by the Government. But blaming them for all the malaise is a gross simplification of the reality. The diagnosis lies elsewhere, and the prescription is not very easy to implement.
I will try to illustrate my case with an example. The Integrated tribal Development Agency (ITDA) of Bhadrachalam is spread out over 12175 sqkm, and has a population of over 8 lakhs. There are about 847 schools, with nearly 5000 teachers, and 70000 children in 2006-07. Among these 847 schools, 645 are elementary and often single or two teacher schools, scattered across the villages in the tribal area. The health logistics is equally massive. There are 49 Primary Health Centers, over 300 sub centers, 10 Government hospitals, and 2 Tertiary Care Hospitals. These hospitals employ over 75 doctors, 350 nurses and other paramedical staff, and 2189 Community Health Centers (CHWs). This is a more or less representative sample of education and health infrastructure in rural India.
Now, I will stick out my neck and argue that no amount of regulation and supervision alone, will abe able to control the activities of nearly 3000 health and over 5000 education staff, spread over the 12175 sq km area of Bhadrachalam. This requires calling on the inherent strength, capacity, and discipline within the entire system and its functionaries. It also requires vibrant demand side interventions and vigilance.
What are the typical problems observed in health care and education? Infrastructure and logistics are rarely the problem, though a lot more still remains to be done on that front. But the major issue is at the cutting edge, in the physical delivery of these services. To be more specific, I am referring to the quality of teaching and health care services delivered to the students and the patients by the education and health functionaries. This quality is abysmal and universally so, in all its dimensions.
For a start, a good majority of teachers and health staff do not regularly attend to their duties. Even when they do, they often shirk repsonsibility and the quality of service delivered suffers. Further, for various reasons, teachers and medical staff are poorly trained and even more poorly motivated. Many of the schools and health sub-centers are located in remote areas with poor or even non-existent roads, which are often inaccessible by any mode of public transport. There are limited or no proper accommodation facilities available, so that the teachers stay elsewhere and have to commute long distances daily. This is an immediate incentive for not attending school or hospital under some pretext or the other. Further, houses and habitations are scattered and in the absence of connectivity, it becomes difficult to traverse without personal vehicles.
On the demand side, with the domestic economic and social compulsions, children frequently drop out and back in, and it becomes a serious challenge to retain children in schools. In many villages, there is no serious demand side pressure and a lack of manifest collective will in ensuring that the school is run properly. Even if the collective will is present, the community is often powerless to have its own way. School and Hospital Committees, wherever present become ornamental and get captured by vested interests.
There are no simple solutions for these very diverse and challenging problems. No Government machinery or political and bureaucratic system can wave a magic wand to solve them. No regulatory or bureaucratic solution can get teachers to visit school everyday or pay attention to the progress of each child. Neither can it get para-medical staff to cover every child and mother with all basic RCH care, or follow-up on all malaria and TB patients without any omission.
While the regulatory and supervisory mechanism is undoubtedly important, of more relevance is the inherent capacity, responsiveness, sense of civic duty and discipline, within the system and its stakeholders. The initiative and responsiveness of the teacher or the paramedical staff is the crucial determinant in the quality of service delivered in an elementary school or health sub-center. No amount of monitoring and supervision, regulation, review meetings and reporting formats, can be a replacement for the sincerity and committment of a field functionary. We need to build capacity among field functionaries through continuous, more focused and meaningful trainings, significantly raise motivation levels, and foster competition and commitment within them. There is also the need to develop social capital and civic responsiveness among the local community and citizens.
Amidst all this gloom and adversity, and the challenges posed by scarce resources, there are glowing examples of well run schools and health centers. These schools are shining models because of the exceptional personal commitment and initiative of the respective teachers and the civic responsiveness of the local community. For these teachers, each child is not a mere statistic, but an opportunity to shape the future of a child whose fate has been placed at their hands. Similarly, there are para-medical staff who cover every ante-natal and post natal case within their jurisdiction, and who have achieved substantial success in delivering high quality RCH and general primary health services. These successes, in the sea of failures and poor quality service delivery, are testimony to the commitment and initiative of the field functionaries and the community.
Now, many people will claim that things are changing and demand side repsonsiveness, in particular, has become more robust. True, but not in the scale for it to create a substantial and widely felt impact. Typically, aid agencies and opinion makers are exposed only to the successfully run school or hospital systems, where there is harmonious convergence between the functionaries and the community. It is understandable, but misleading to draw grand conclusions from these "show piece" models.
With due respect to poverty experts, I am convinced (since I am part of the system which does this) that except for a very small minority, the majority of them are paraded or get to visit only the more sanitised and successfully run models. This is understandable since the NGOs or the Government agencies have a clear incentive in showcasing the successes, so as to impress the funding agencies or donors, and also to enhance their reputations. The impressions they carry back home and propagate are therefore skewed and deceptive.
Yes, bureaucrats and politicians have contributed more than their share in spoiling the quality of primary health care and education services delivered by the Government. But blaming them for all the malaise is a gross simplification of the reality. The diagnosis lies elsewhere, and the prescription is not very easy to implement.
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